[Federal Register Volume 76, Number 237 (Friday, December 9, 2011)]
[Notices]
[Pages 77040-77042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31604]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65889; File No. SR-NYSE-2011-60]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 72 Priority of Bids and Offers and Allocation of 
Executions

December 5, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on November 21, 2011, New York Stock Exchange LLC (the 
``Exchange'' or ``NYSE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange filed the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 72 (Priority of Bids and 
Offers and Allocation of Executions). The text of the proposed rule 
change is available at the Exchange, at http://www.nyse.com, at the 
Commission's Public Reference Room, and at http://www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Rule 72 (Priority of Bids and 
Offers and Allocation of Executions).\5\
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    \5\ The provisions of Rule 72 are in effect during a pilot 
(``New Market Model Pilot'') that is set to end on January 31, 2012. 
See Securities Exchange Act Release No. 58845 (October 24, 2008), 73 
FR 64379 (October 29, 2008) (SR-NYSE-2008-46). See also Securities 
Exchange Act Release Nos. 60756 (October 1, 2009), 74 FR 51628 
(October 7, 2009) (SR-NYSE-2009-100) (extending Pilot to November 
30, 2009); 61031 (November 19, 2009), 74 FR 62368 (November 27, 
2009) (SR-NYSE-2009-113) (extending Pilot to March 30, 2010); 61724 
(March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-NYSE-2010-25) 
(extending Pilot to September 30, 2010); 62819 (September 1, 2010), 
75 FR 54937 (September 9, 2010) (SR-NYSE-2010-61) (extending Pilot 
to January 31, 2011); 63616 (December 29, 2010), 76 FR 612 (January 
5, 2011) (SR-NYSE-2010-86) (extending Pilot to August 1, 2011); and 
64761 (June 28, 2011), 76 FR 39147 (July 5, 2011) (SR-NYSE-2011-29) 
(extending Pilot to January 31, 2012).
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    As provided under Rule 72(a)(ii), a bid or offer is considered the 
``setting interest'' when it is established as the only displayable bid 
or offer made at a particular price and is the only

[[Page 77041]]

displayable interest when such price is or becomes the Exchange best 
bid or offer (``BBO''). Setting interest is entitled to priority for 
allocation of executions at that price, as provided for under NYSE Rule 
72. In this regard, and as currently provided for under NYSE Rule 
72(a)(ii)(G), if non-pegging interest is the setting interest, it 
retains its priority even if joined at that price by a pegging e-
Quote.\6\ If, however, at the time non-pegging interest becomes the 
Exchange BBO, an e-Quote is pegging to such non-pegging interest, all 
such interest is considered to be entered simultaneously and, 
therefore, no interest is considered the setting interest.
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    \6\ See Rule 70.26--Pegging for d-Quotes and e-Quotes.
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    Since implementing this rule as part of the New Market Model Pilot, 
the Exchange has determined that Rule 72(a)(ii) may currently 
disincentivize aggressive displayed quoting by permitting pegging e-
Quotes to eliminate the priority to which a non-pegging e-Quote might 
otherwise be entitled. Specifically, because pegging interest is not 
displayed until it joins non-pegging interest, the participant entering 
the non-pegging interest is unaware that one or more pegging e-Quotes 
at that price may exist. Because the goal of the setting interest, and 
related priority given to such interest, is to create an incentive for 
participants to display aggressive prices, a participant may be 
reluctant to enter such displayed interest if a non-displayed pegging 
e-Quote could impede such displayed interest from receiving priority. 
The Exchange therefore proposes to amend NYSE Rule 72(a)(ii)(G) to 
reflect that non-pegging interest that becomes the Exchange BBO will be 
considered the setting interest even if an e-Quote is pegging to such 
non-pegging interest.\7\ In this regard, the Exchange believes that 
this proposed change would enhance the New Market Model's positive 
impact on the Exchange's market, on the Exchange's members, and on 
investors generally.
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    \7\ Non-pegging interest that is the setting interest will 
continue to retain its priority even if joined at that price by a 
pegging e-Quote. See id.
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    Because of the related technology changes that this proposed rule 
change would require, the Exchange proposes to announce the initial 
implementation date and related roll-out schedule, if applicable, via 
Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and 
furthers the objectives of Section 6(b)(5),\9\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest. The Exchange 
believes that the proposed rule change meets these requirements because 
it would permit non-pegging interest that sets a new BBO to be 
considered the setting interest and therefore retain priority, as 
provided for under NYSE Rule 72, over a pegging e-Quote that reacts and 
pegs to such non-pegging interest. Accordingly, the proposal is 
designed to incentivize and reward aggressive displayed quoting by 
market participants, which contributes to the market quality of the 
Exchange. In this regard, the Exchange believes that this proposed 
change would enhance the New Market Model's positive impact on the 
Exchange's market, on the Exchange's members, and on investors 
generally.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2011-60 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2011-60. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and

[[Page 77042]]

copying at the principal office of the Exchange. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2011-60 and should be submitted on 
or before December 30, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31604 Filed 12-8-11; 8:45 am]
BILLING CODE 8011-01-P